Residential Property: First-time Buyers are being wooed back into the property market by higher mortgage interest relief and easier access to funds through local authorities.

However, seasoned property investors are to be penalised with a new annual tax on rental properties and holiday homes.

The top rate of stamp duty is being cut - from 9 per cent to 6 per cent - but only for commercial property transactions. This will compound disappointment in the moribund residential property sector. But recovery has to start at the bottom, and yesterday's measures could kick-start the new homes market at a time when developers have cut back prices to clear a huge oversupply in apartments and houses.

Mortgage interest relief for first-timers has been raised to 25 per cent from 20 per cent in the first two years of a mortgage, dropping to 22.5 per cent in the third, fourth and fifth year, with slightly lower relief up to year seven.

To pay for this change, second-time buyers will take a hit. Mortgage interest relief will drop from 20 to 15 per cent. Describing these changes as a "rebalancing", the Minister for Finance said it will make for a "fairer system" and help those "with the biggest financial exposure and those facing falling property values".

First-time buyers are to be offered mortgage funding from the Housing Finance Agency through local authorities. And, in a simplification of the affordable housing scheme, the Government is offering to take an equity share in properties purchased.

Social housing providers have seen their budgets cut back slightly, but they are in a position to hunt for bargains, according to Donal McManus, executive director of the Irish Council for Social Housing (ICSH).

"Social housing providers will be looking for more homes for less money from builders, which will hopefully reverse the excessive price inflation that has been a factor for some years," he said.

The property industry broadly welcomed the measures for first-time buyers. Paul Murgatroyd, economist with Douglas Newman Good, said the local authority mortgage scheme should "improve access to credit for those people currently finding it the most difficult to obtain finance from the normal lending sources, through absolutely no fault of their own".

Tom Parlon, director general of the Construction Industry Federation, also welcomed the key Budget provisions on stamp duty and mortgage relief, saying they "should help address the lack of liquidity, whereby first-time buyers could not access adequate finance to complete the purchase of their homes".

The Irish Auctioneers Valuers' Institute (IAVI) said it was concerned at the new €200 levy on second homes, which it viewed as a stealth tax on investment properties. "While some taxation may be justifiable on holiday homes, the IAVI is concerned that, having established such a principle, the temptation will be to increase the tax progressively," a spokesman said last night. The levy is to be paid to local authorities, which have seen their income dwindle in the last 18 months because of the lack of development levies as a result of the property downturn.

Estate agent Ken MacDonald of the Hooke MacDonald agency described the levy as "only a pinprick for people who own property. If you have quite a few properties, you can afford to pay it," he said.

Chief executive of the Institute of Professional Auctioneers and Valuers (IPAV) Fintan McNamara called on the Government to reconsider the levy. "While the figure may appear relatively low, it acts as a further disincentive to the many thousands of people who provide private accommodation to students and short-term dwellers, thereby relieving the State of a major burden," he said.